Stake-holder Firms and the Reform of Local Public Finance in China

Abstract

Since 1978 China has developed strongly using a particular form of capitalism which has relied upon close relations between private enterprise and the state and the continuing presence of state-owned enterprise, both centrally and at local levels. This model has been criticised as being responsible for the rapid rise of debt since 2010 and the slow-down of growth more recently. Using examples taken from Guangdong Province in south China I illustrate the workings of this system and highlight the challenges to adapting it to support China's growth ambitions for the coming decades.

Keywords: state capitalism, debt overhang, infrastructure, local public finance, enterprise reform

JEL Classification: G3, H2, K4, P2